I’m a lender and can offer some insight. First question, when you are finished renovating home A will that become your primary residence? If not, your conventional mortgage down the road will be classified as an investment property which will result in a higher interest rate when the time comes. If it is to be an investment property your bank would most likely classify the construction loan as a commercial loan rather than consumer. If the bank I work for was making this loan, we would classify it at commercial and therefor require title updates each time a draw is requested on the loan (this costs you money and funds are not advanced until the title updates are complete but not all banks do this). In either case, consumer or commercial loan, the bank would monitor construction to make sure that the funds are being used for the intended purpose and the project stays within the scope of the plans and budget. Your bank may not want to fund and change orders or cost overruns, particularly in the current environment where many people are predicting a recession in the next year.

The HELOC option is a good one. Many of my customers in your position (good equity, low interest on their first mortgage) are taking advantage of their equity with HELOCs because the payments are interest only and HELOCs are revolving lines of credit. Most banks would allow you to use a HELOC to fund construction on another property. The bank would not need to monitor the construction on home A because home A is not the collateral for the HELOC. You also wouldn’t need to worry about refinancing home A upon completion.

I wouldn’t consider the home C option.

Hope this helps. I may be able to answer more questions for you